A new year is here and while more dividend increases are expected let’s take a look back and see where we ended up in 2017.

Check out this chart:

Not bad eh?

We ended 2017 earning $15,150 in dividend income for the year in the three key accounts I use for these updates – TFSAs and a non-registered account. We are now happily DRIPping the following stocks inside our TFSAs:

Bank of Montreal (BMO)

Bell Canada (BCE)

Capital Power (CPX)

Enbridge (ENB)

Fortis (FTS)

H&R REIT (HR.UN)

Smart REIT (SRU.UN)

Innergex Energy (INE)

InterPipeline (IPL)

Laurentian Bank (LB)

National Bank (NA)

Power Financial (PWF)

Telus (T)

…and onwards and upwards we go in 2018!

Here are some of questions I get about my dividend investing approach – which I’m happy to answer as part of these updates.

The bulk of our contributions comes from maxing out our Tax Free Savings Accounts (TFSAs) every year. That means, for this 2018 year, we intend to invest $11,000 for our financial future. Give or take, about $11k invested will churn out about $400-500 per year in dividends. So, without any dividend increases for any of the stocks we own, we can likely assume our dividend income will be at least $400-$500 more this time next year.

(This is a good time to remind you we also invest in our Registered Retirement Savings Plans (RRSPs) but most of those assets are in U.S.-listed ETFs; and that income is not part of these updates. See question #2.)

Question #2 – Why don’t you include your U.S. assets in this update?

Fair point. I suppose I could, but then, that complicates things with a fluctuating U.S. and Canadian dollar exchange rate. In addition to that, these updates have historically focused on tax-free (TFSA) and tax-efficient (non-registered) dividends from Canadian stocks only. Third, while I could easily include projected RRSP-withdrawals as income for these updates I have no idea how I’m going to manage that yet. So, I simply don’t include that income in these updates – for now. Readers might convince me to change my mind. You’re welcome to try 🙂

Question #3 – Aren’t you concerned about diversification in your portfolio with only Canadian dividend paying stocks?

Doom and gloom aside I know investing only within Canada’s borders limits my worldwide diversification AND our ability to earn returns beyond Canada. Look at the U.S. market last year. An indexer in the U.S. market would have earned close to 20% return!. What I’m getting at is we invest heavily using U.S. stocks and some U.S.-listed ETFs inside our RRSPs. You can see some of my favourite low-cost U.S. ETFs here and here.

Not anymore. While I love reinvesting dividends, I found it difficult to keep my Adjusted Cost Base (ACB) tracking up to date. I need this for Canada Revenue Agency (CRA) reporting if/when I sell my stocks to calculate capital gains (or losses). By shutting off the dividend reinvestment plans (DRIPs) in my taxable account I have essentially frozen my book values. I’ll still need to keep ACB information but it will be less time consuming and one less financial item I have to worry about by taking the dividends in cash. Besides, it’s not like I’m totally giving up the magic of compounding – we have many stocks inside our TFSAs (see above) whereby dividends are reinvested every month and quarter. I’ll continue to DRIP all stocks inside our TFSAs since money that makes money can make more money.

So, to summarize where we stand:

We intend to hold 30-40 Canadian dividend paying stocks (no Canadian ETFs or other funds) inside our TFSAs and non-registered account for growing dividend income for the foreseeable future. This is what these monthly updates are all about.

To gain more diversification, we hold predominantly U.S. stocks and U.S.-listed ETFs inside our RRSPs.

That’s basically it.

We look forward to crossing another dividend milestone later this year ($16,000) and that will be 53% towards realizing a major financial goal.

Got questions? About our journey? About investing in general? Send them my way and I’ll do what I can to answer them. All the best for your investing journey in 2018!

Mark Seed is the founder, editor and owner of My Own Advisor. As my own DIY financial advisor, I've grown our portfolio to over $600,000 now - but there's more work to do! Our next big goal is to own a $1 million investment portfolio for an early retirement. Subscribe and join the journey!

Mark I am a US investor and think its great what and how you are saving for financial freedom. But and this is a big BUT to sit down and really look at what inflation will do to you purchasing power 20-30 years in the future. Its amazing how expensive things are getting today and just looking back a few years to see what things used to cost. Its like adding 2.3 % additionally to you holdings on a yearly basis not including taxes and trading fees etc. But we tend to look past inflation
Thank You and stay warm if possible

Great point Mike. This is why I like purchasing and owning stocks with some inflation-power designed in. Banks can charge more fees, if interest rates climb eventually, banks and lifecos will flourish. Utilities and telcos can pass on inflationary costs to their customers. So, over time, yes things will cost more but by investing in these companies, yes, their revenues should also climb too.

If it is just a straight split with an equal adjustment to the dividend it means little to me. One could always hope for some kind of enhancement (special dividend for example) but I’d not hold my breath on that. I buy and hold so the ongoing dividend/yield is more important than the price.

Why no Altagas? ALA.to Was a top pick on BNN last night…they are buying a huge US utility. SP is down 30%, div up 30%…great buying opportunity was the guests comments. 7.5% div rate, paid monthly, can DRIP at 3% discount

BRE.to is another sweet div… 8%

AD.to was 9% div when I bot , Tax loss selling discount

Luckily I had some ‘dry powder” to buy during tax loss selling ….will remember that for next Dec.

as long as the price comes back? That would be horrible for a yield investor like me. hopefully the price stays the same and div’s go up, then DRIP’s work much better
Total return does not pay retirement living expenses….div’s do.
When I lived in BC, Interior Region, there were some retired Ontario people living there, just 1 retirement investment…from where they worked for 30+ years. All they did was buy bank stock, where they worked, Employee Share Purchase Plan.
Share splits, DRIPS, div increases = huge div cheques every Q to support them. Whatever price the bank stock was at did nothing to support their retirement…even in the economic crisis of 2008-2009 when Royal Bank SP went to $18…didn’t change their quarterly income.

Like buying Laurentian Bank AFTER the haircut…1 yr return on that bank must suck, Jan 2 2017 SP was $59
And yes, I did buy LB day of haircut…sometimes good stocks just get cheap. In LB case…4.3% div….not cheap on a yield basis but Covered Call selling after a haircut can help that paltry yield

If you think about the math part of it…DRIPS work best if div’s stay same/increase and SP flatlines or decreases. Buying cheaper DRIP shares = a whack more dividend paying shares in 10 years than if SP increases and you are buying less # of shares as time goes on.
I would call LB a reliable div payer…as all CDN banks should be. But why pay a high P/E just to get a paltry but reliable div?
Check out FEO.NY…was paying a 8% div when i bot some for an emerging market play. They own the Telus /Bell/Royal banks of Brazil, Turkey, Russia etc…that only trade at 6X …instead of buying S & P trading at 22X ( or whatever the exact #’s are) in Countries that are growing rapidly unlike Central Banks’s that cut interest rates to juice house construction

I guess another take is…SP goes up, up, up and that Co does a share split and divs keep growing. Another way to look at yield
But I would rather have 100 shares paying 8% than 200 paying 4%

More than fair, but I don’t want the stocks I buy to drop by 50% or more in price since that also puts pressure on the dividend. Yes, in general terms, I do want stocks to be cheaper during my asset accumulation years.

FEO:US eh? Will look at. I assume that’s one to own in the registered account? i.e., RRSP in particular?

Yes you need to hold FEO in a RRSP to avoid Uncle Sam’s greed div hands.

herd mentality….my fiancee understands when Holt Renfrew has a sale…that $800 dress is now $400.
But when it comes to the market and when …well run stocks go on sale…only a few, seasoned investors step up. The rest…look at that dress 3 years ago was $800…now $400…must be something wrong. Like anything…inspect before you buy.
I recall back in the dot.com era, the herd was rushing to buy anything with a dot.com in it’s name ( substitute pot or crypto for today) and solid, well run, boring industrial co’s…some with beaten up SP paying dang near 10% div’s could barely get a bid. 5 years later…they had quadrupled in SP as the dot.com era ended as all bubbles do.I might be early but getting paid 7 – 9% while I wait? OK with me.
Also, as I do a lot of investing in jr Resource stocks, buying in 3 tranches is preferred. 20%, 20% 60% in that sector.

Back when FEO was $15.60…was a buy for me as I had some USD…now inching towards $17…I’m not buying anymore
Had a stink bid in…bot 1 share at $15.27, the rest $15.61
Do you have anything in the AG sector for diversification ?

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Mark Seed is one of Canada's leading personal finance and investing bloggers. As my own DIY financial advisor we've grown our portfolio to over $500,000 - but there's more work to do! Our next big goal is to own a $1 million investment portfolio for an early retirement.

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